Canadian Competition Act | S3 EP4

In June 2023, the Competition Bureau is set to start enforcing amendments to Canada’s Competition Act that were announced in June 2022. These amendments seek to protect competition in Canada’s labour market and pertain to no-poach and wage-fixing agreements, which will become illegal and subject to criminal penalties. These amendments could possibly mean big changes for Canadian companies and how they do business. Chris Hersh joins us to discuss the potential impacts in the Canadian labour market. As a partner in our Toronto office and head of our Canadian competition practice, Chris provides strategic counsel to clients on all aspects of competition law.

For more information: 
No-poach, no problem: Competition Bureau releases enforcement guidelines for wage-fixing and no-poaching agreements

CPD credits: This episode is accredited for 0.6 Substantive hours in Ontario and 0.6 Substantive hours in British Columbia.

Transcript

Listen and subscribe to the Disputed podcast on:

• Apple Podcasts
• Spotify
• Google Podcasts

Transcript:

Chris Hersh  00:00
It just goes to what happens when you-- when you create a provision of law that you-- you try and squash a flea with a sledgehammer. That's really what they've done.

Ailsa Robertson  00:07
Hi, you're listening to Disputed, a Norton Rose Fulbright podcast. And in this episode, we're talking with the head of our competition and anti-trust team in Canada; Chris Hersh, about changes to Canada's competition laws that are coming into force this June. Last year, the federal government made several changes to the Competition Act. The key change that we're talking about is the introduction of a criminal provision that will prohibit certain types of labour-related agreements, specifically no-poach, and wage-fixing agreements. As of June 23rd this year, it will be a criminal offence for employers to fix, maintain, decrease or control salaries, wages, or terms and conditions of employment, so-called wage-fixing agreements. It will also be a criminal offence for companies to agree not to solicit or hire each other's employees. The penalties are going to be severe: they include jail terms of up to 14 years and/or fines at the discretion of the Court. Now, the issue for businesses, is that no-poach provisions in particular, are prevalent across many standard commercial agreements, for example, NDAs in a merger transaction, or also franchise agreements, joint ventures and other collaboration agreements. The Competition Bureau recently issued draft enforcement guidance, which it is accepting comments from stakeholders on until March 17th. Now it is hoped that there will be clarification over the new laws application and the availability of the ‘ancillary restraints defense’ or the ARD as we refer to it in this episode. However, there still remains a lot of uncertainty over how these provisions will be enforced in practice. So Chris Hersh explains the changes and the key issues that companies and their compliance teams should be considering to prepare for the new law. As the head of the firm's Canadian competition practice, Chris provides strategic counsel to clients on all aspects of competition law. From M&A to criminal matters, abuse of dominance, pricing and distribution issues. Chris also has an active competition litigation practice representing clients before the Competition Tribunal, and in transporter investigations.

Ailsa Robertson 02:27
Hey, Chris, thank you very much for joining us, welcome to the podcast. So this episode is about the new wage-fixing and non-solicitation agreement provisions that are coming into force in June of this year. So I want to start with you telling our listeners why they need to pay attention to this episode. What are the changes that are coming in and why are they significant?

Chris Hersh  02:51
Right, well, happy to be here. And thanks for that intro. What's important is the provision is a-- is basically a two-line provision, or two-line change to the Competition Act.. But it's already causing a bit of unrest amongst a lot of companies, because the potential impact it’s going to have on, you know, some of their contracting practices. So what the government's done is that in June of 2022, they passed a law that will come in force June 2023. And there's a criminal prohibition for any employer, who with a non-affiliated employer, and we'll talk about that in a second, conspires, agrees or arranges, so I’ll use the term ‘agrees’ to either fix, maintain decrease or control salaries, wages, or terms and conditions of employment, or not to solicit or hire each other's employees. So for short -form, I'll call the first section, the fixing or maintaining salaries, as I’ll call that ‘wage-fixing’, but remember, that also includes terms and conditions of employment, so much more than just wages. And I'll call the second provision not to solicit or hire; ‘no-poach’. And so, that's the offense. The way it works is that entering into one of these types of agreements is illegal. It doesn't matter whether it has an effect on competition, entering the agreement is the offense. This agreement is then in terms of how the Bureau will enforce it. We have what's called the ‘ancillary restraints defense’, I'll use ‘ARD’ for that, and that's been on the books for a while. It’s not an exception, it's a defense. So it's a second step. It's a defense to a criminal prosecution, where the companies at issue can take the position that the restrictive agreement, i.e. the wage-fix or the no-poach agreement, is part of a legitimate agreement between them and is reasonably necessary and ancillary to the purposes of that legitimate agreement. In terms of how this happens, or what happens is, the Competition Bureau will be the first, they’re the investigator if you will. So let's assume that they either for whatever reason, they find an example of a wage-fixing or no-poach agreement, or somebody complains, the Bureau is very complaint-driven organization, somebody complains to them. The way this works is that the Bureau will do the first assessment, they will do the-- whether there has been a contravention of the prohibition on no-poach or wage-fix, and then they will do a first assessment as to whether they think the ancillary restraints defense applies. And what they can do at that point is they can, you know, try and work something out with a party, some sort of resolution, or if they think that it's problematic, is it just sort of a pure wage-fixing agreement, they would have to refer a prosecution to the Public Prosecution Service, who would then conduct its own assessment about whether to actually bring criminal proceedings in a particular situation.

Andrew McCoomb  05:53
Chris, I think we're going to circle back on a couple of the technical pieces that you just mentioned, but let's first address the motivation. This is a significant imposition in the law, what's the inciting event or the inciting concern for these new provisions?

Chris Hersh  06:09
Right, so the question was, like, how did we get here? Why did the government feel the need to introduce these and I think it's important that they threw them into budget implementation legislation. They were not vetted. They were not open for consultation. They were just sort of put into this budget implementation legislation, they were not reviewed at any degree. The impetus, there's kind of a couple of impetus, impeti. The first is that, about a year and a half ago, there was a story that broke about several executives from major grocery chains, having had conversations about rolling back pandemic pay increases for their employees. And they got a lot of negative press, they got called to testify before committee in Ottawa. And everybody said at that time, this has to be against the Competition Act. And it turns out that the way our Competition Act. is drafted, in particular that the criminal provisions, they don't capture agreements relating to labour. Our Competition Act. criminal provisions capture, supply-side or sell-side agreements, not what we call it buy-side agreements. And when it comes to employees, employers are purchasers of labour, as opposed to sellers of labour. So our laws, we didn't have a specific wage-fixing or no-poach provision. But the existing provisions that we had regarding agreements related to pricing or supply did not apply. And, you know, there was a, you know, a bit of a political and, you know, populist concern that, how can it be right to allow employers to fix wages, and not be subjected to some sort of law, preferably criminal law. So that's sort of how you get wage-fixing into there. Also, in the US, the US Federal Trade Commission and Department of Justice, have taken a much more aggressive approach over the past few years regarding labour-related agreements between employers. In the US, there have been cases where--, where there were allegations of, again, naked no-poach agreements. There's been some in the healthcare sector where hospital networks agreed not to hire each other's nurses, or other service providers. And there was one several years ago in Silicon Valley, where all the Silicon Valley tech companies got together and basically agreed not to poach each other's employers within certain sort of fields of expertise, because there was a war for talent. And they basically decided that it was better for all of them to limit how much poaching took place. So that's kind of how we get the no-poach in. And also, like I said, our closest neighbour, is the regulators taking a more aggressive approach to labour-related agreements between employers.

Ailsa Robertson 09:04
High-level, Competition Act. is a law of general application, right? There's no threshold of the application of these provisions, it doesn't apply to sectors or most public companies will compete over certain sizes, its everyone.

Chris Hersh  09:15
Correct, right. That's, you know, basically this is, you know, there's doesn't be competitive effect, doesn't matter how big or small you are. The-- the agreement is the offense. From a practical perspective, the Competition Bureau is often more interested in taking aggressive enforcement action against larger companies from a profile perspective. But that doesn't mean that smaller companies are insulated in any way.

Andrew McCoomb  09:37
Earlier, you mentioned the ancillary restraints defense, the ARD. I wonder if you could talk us through that in more detail because, well, naked wage-fixing agreements aside, no-poach agreements arise frequently in the broader context of commercial transactions. Take us through some examples of where you commonly see no-poach agreements, maybe explain how the ARD might enable these types of provisions to be upheld.

Chris Hersh  10:04
That's right. Wage-fixing is, you know, relatively uncommon. And I think it will be harder to-- harder in many cases, to justify a wage-fixing agreement as being ancillary and necessary to a broader agreement. No-poach’s arise all over the place for legitimate agreements. They arise in often in the types of non-disclosure or discussion agreements that permit discussions between parties to negotiate a merger, where the only reason why people are become-- being put in contact with key employees, is as a result of the discussions between the parties relating to the merger. These are also very common in the context of joint development, or joint ventures, where you have two companies partnering legitimately for, you know, to either do the research and development, or to engage in a business initiative, where, you know, it again, it puts their best and brightest together. People who might have some proprietary information. And in fact, you know, the companies might only trust each other if they agree that they can't steal each other's best and brightest employees. And you also see a very commonly in outsourcing contracts, where, for example, many companies hire a specialist IT firm to help them again, develop a particular software application or engage in some other technical project, where again, it puts people in touch with--, with employees who have very, very specialized technical information, people who are very hard to replace. And so again, it's a protection that we need to work together very, very closely. And again, we think it's legitimate that we should each have the right to protect our employees for a period of time, there are several instances where there is a, at least, arguably a legitimate need or legitimate purpose for restricting one company's ability to hire the other company's employees and vice versa.

Ailsa Robertson 11:47
And you also mentioned earlier about the ancillary restraints defense, in the examples that you've just given us, where no-poach agreements are very common, can you just explain how the ancillary restraints defense, the ARD operates-- might operate in those contexts.

Chris Hersh  12:03
So it's more to note that the ARD has been on the books since about, I think, 2009 or 2010. It was put in place during the last major reshuffle of the Competition Act., which was actually in 2009, 2010, depending upon the provisions. There's no jurisprudence on the ARD. So it's been on the books, there's some guidance about how the Bureau will apply it in respect of the other criminal provisions in the competitor collaboration guidelines the Bureau has published. That's why you haven't seen enforcement. You know, there's lots of non-competition provisions in the context of a sale of a business. Or yet again, joint venture agreements often include provisions that restrict the parties to the joint venture from competing with the joint venture. So-- so there is a little bit of guidance from, in terms of how the Bureau will enforce or apply the ARD. But there's no case law. And that's, you know, as a lawyer, that's what's concerning, because the guidance documents the Bureau puts out are non-binding and they're often generally quite vague. In the fact that Competition Bureau has published draft guidelines regarding how it will apply the ARD, and how it will seek to enforce these provisions. And, quite frankly, they don't provide that much guidance, they’re not-- in some ways, they're useful, in many ways they leave more questions unanswered. So there was an ongoing consultation process with submissions that can be filed up until I think, March 17th. But, so the Bureau will put out some guidelines-- some guidance, I should say, the question is how good it is. Because right now, the, at least my view is that the guidance document they prepared leaves a lot of grey. And the grey is where companies are incredibly uncomfortable, especially given that we are talking about potentially criminal conduct.

Ailsa Robertson 13:49
That's interesting that there's never been a decision on the application of the ancillary restraints defense in-- in context.

Chris Hersh  13:57
And I think that's because, you know, the, to be fair to the Bureau, I think that they haven't gone-- sought to apply the existing criminal provisions, for example, the-- the price-fixing provisions or agreements to restrict supply or market allocation agreements. I don't think they've gone after sort of the provisions that you would see that might be technically offside those provisions, but subject to the ancillary restraints defense, I think the Bureau has acknowledged that, again, that non-competition provision in the context of a sale of a business, that is a clearly a legitimate type of protection. It’s clearly in the context of a sale agreement, which is a broader, legitimate agreement between the parties. And, you know, they don't want to get into sort of second guessing people, you know, and they don't want to sort of say, well, we think it should be should have been six months and not 12 months in those situations. And also it may reflect the fact that people in those situations aren't likely to complain to the Bureau. Because if the buyer’s happy and the seller is happy, then no one complains to the Bureau, and the Bureau, you know, these agreements are generally speaking, private, most of these agreements are private, or a lot of them are. And-- and so they're not, you know, we're not looking to go out and bring sort of questionable criminal cases. So I think that is helpful in terms of trying to understand where the Bureau might come at this from a practical perspective. But again, the types of agreements that we've been dealing with in the past, again, price-fixing, customer market allocation, supply limitation, those, you know, and the types of situations that the Bureau hasn't sought to apply the law or hasn't sort of put people in position where they need to argue that the ancillary restraints defense applies. I think those have been much more clear cut cases, right? Like it's, you know, it's—whereas-- these provisions, again, I think wage-fixing is different than the no-poach provisions, because it's often, you know, wage-fixing is much more like a price-fix. And so again, there may be fewer cases, where that is going to be subject to an ancillary restraints defense, what's really I think, fussing people from the clients we're talking about is, how do they go about entering into sort of no-poach and non-solicit agreements, or no-hire agreements, given how many situations where those are legitimately viewed as important to have in the context of their dealings with another company, the problem is here, why people are so concerned, and why the ancillary restraints defense is getting so much more attention is because these no-poach agreements, almost exclusively live in broader agreements. You know, there's not a lot of what we call, again, naked no-poach agreements out there. But there's tons of legitimate agreements where the parties feel it's appropriate to have some protection, it was so clear under the existing provisions, what was clearly offside what the Bureau clearly wasn't—unlikely to view as problematic. So I think the no-poach provisions, all of a sudden people are thinking about, well, I've got a business behaviour that I have engaged in for years and years and years, that I think is important, from a commercial perspective to protect employees from being hired. And so I think that this is a situation where that this-- this provision, I can say, is getting a lot more attention than it's ever gotten before. And so companies are rushing the fact that I feel I still need to, even though there's a criminal prohibition against this, I can't just ignore the risk. So how do I contract around the risk, such that the ancillary restraints defense is more likely than not to apply, because I need to protect my-- my talent pool.

Andrew McCoomb  17:37
Chris, at the start of this discussion, you referred to non-affiliated companies, and how these provisions only apply to agreements between non-affiliated entities. What's the difference in application between affiliates and non-affiliates?

Chris Hersh  17:52
So that's--, that's important, because under competition law, generally, it's--, it's if companies are affiliated and in my world, that means companies are under common legal control, sort of 50 + 1% ownership, you're not really a different company in that case. You're-- you can't conspire with yourself, you can't wage-fix for yourself. You don't agree with yourself. And that's why, you know, you see, like a 50/50 joint venture. You know, that's a situation where neither party, that joint venture is not an affiliate of either party. Because again, you have to own more than 50% to be an affiliate under-- from a competition law perspective, it’s that true legal control test, as opposed to some other sort of de facto or sort of sense of semblance of control test?

Andrew McCoomb  18:34
The types of concerns that you outlined are the same kinds of concerns that animate people in seeking, for example, you know, tax comfort letters. What's the ability here to get a pre-approval or a blessing from the Bureau on a deal, is that feasible here?

Chris Hersh  18:49
So you can get-- the Bureau does have an advisory opinion program, and you can get an advisory opinion. But there is a fee to that. But also, there's a process involved, in addition to time that you're gonna have to sort of prepare a submission to the Bureau explaining, especially if it's a close case, which is the only ones where this matters, explaining what you're doing, why you're doing it and asking the Bureau to bless it. The Bureau is an enforcement agency, and you know, they are a conservative agency. If people want 100% comfort, this is the only way they're gonna be able to get 100% comfort. But there's also the concern that the Bureau may take an overly cautious approach when being asked to bless something, as opposed to having to make an enforcement decision after the fact. And so it's a- it's a process that is not inexpensive. It's a process that, again, the Bureau may take a much more cautious approach than may be warranted, especially in early days. And there's a time-- a time involvement and the other thing is, how useful is this because it's not like you can get a blanket approval for all of the non-- the no-poach provisions, you might want to enter into, right? Whether a no-- a particular no-poach, is going to be caught is highly fact-specific. If you really wanted to get 100% certainty, you'd have to do it every time you entered into an agreement. I'm being a little bit facetious, but, you know, but every agreement is different. The, what might be reasonably necessary in the context of the broader agreement may change, depending on the broader agreements. If you repeatedly contract with one or two firms for very similar projects, then maybe you could get some comfort, that the no-poach provisions you have in those agreements could shelter under the ARD. But if you're a company that enters into multiple agreements of this nature, then that's just not practical. So again, it's the more significant the agreement at issue, the more important it is to have a good no-poach in the agreement, the more that advisory opinion process make-- makes might make sense. But it's not going to make sense for smaller agreements, or all of the agreements where you might legitimately want to use a no-poach agreement.

Andrew McCoomb  21:01
So Chris, can you explain to us what the potential penalties are for a breach? And what's the exposure for companies, directors and officers?

Chris Hersh  21:09
The penalties because confirmed it’s coming into the force of these provisions in June 2023, the government has maintained the current prison sentence of up to 14 years, although we don't have a strong history of sending people to jail. But certainly that is a penalty that does exist. And they-- they're going to increase the fines so that there are fines in the discretion of the Court. In practice, that means potentially very significant fines or the Court will use the normal sentencing or finding approach that they would use in terms of sort of the type of conduct and the-- and the nature of the, you know, aggravating, mitigating factors. In fact, the largest fines levied under the Competition Act. have been under provisions where the fines are in the discretion of the Court. And in terms of who is likely to go to jail, again, the government, our Public Prosecution Service has not historically sent a lot of people to jail for contravention of the Competition Act., but it would be primarily the at risk would be people who are directly involved with the conduct, or knew of the conduct. So if you had a situation where let's say the officers, or the directors of the company didn't know this was happening, or this was happening at a level below them in an operation level, it'd be unlikely for a director to be sent to jail. But certainly the person who was entering into the contracts could-- is more likely to be subject to possible imprisonment. Typically speaking, people do enter into plea agreements and often those plea agreements, the company is the one who sort of makes the plea. And they often shelter employees from individual criminal prosecution, or jail. So again, we don't have a strong history of that. But certainly, that is a possibility and it all it takes a different approach from the enforcer, and from the prosecution service to decide that they want to start sending stronger signals.

Ailsa Robertson  22:54
One thing I want to ask you about is information sharing and where this sits with these provisions. I’m thinking about mass recruitment activities, let's say in any kind of industry, where there is kind of graduate recruitment activities taking place, there is a bit of informal information sharing potentially that goes on between various companies in that industry as to who might be an appropriate candidate, or what conditions may be being negotiated for particular recruits at that time. And I'm just wondering how that practice of information sharing which isn't necessarily an agreement to fix employment conditions, or to agree not to take a certain recruit as long as somebody else doesn't take another recruit, but it's still-- it's still close to that line. And I'm just wondering how that practice might square with these new provisions, particularly, when you bear in mind the provision that the Competition Bureau can infer a criminal arrangement based on circumstantial evidence.

Chris Hersh  23:52
Right. So this is, you know, this is not unique to this particular set of provisions. This applies equally to sort of exchange of sensitive information between companies, generally speaking with regard to say pricing or customers. And the-- the draft guidelines currently say that the Bureau will consider what we call parallel conduct, which is not illegal, facilitating practices. So whether you're sort of not agreeing, but sort of the wink and the nod situation. Sharing sensitive employment information or taking steps to monitor that can be sufficient, to your point, as circumstantial evidence that there's an agreement and what they do in that situation is, they would look at what sort of engagement the parties who have been alleged to have entered into one of these agreements have had, and they would compare and contrast that with their actual conduct before and after the, you know, inappropriate, for lack of a better term, engagement. Some of these sort of practices or be the fact that people haven't been overly focused about sort of having these types of discussions is a sort of thing that people do need to think about from a compliance perspective. The other situation, that I think this is quite relevant too, is that many trade associations do some sort of HR benchmarking studies, which can include things such as, what's your average increase in salary? What's your bonus range? I think it's really important that when I use the shorthand wage-fixing the provision covers-- covers other terms of employments and the Bureau's guidance that they put out, again, it's not final, it's not the law. They've said that this can include job descriptions, allowances, per diems-- per diems, and mileage allowances, non-money compensation, working hours, location, non-compete clauses, or other directives that may restrict an individual's job opportunities. And the Bureau has said that its enforcement is generally going to be limited to those, and I'm quoting from the draft guidance, terms and conditions that could affect a person's decision to enter into or remain in an employment contract. And that's, you know, quite broad. Question whether a criminal court would take the same view, because as a matter of law, criminal statutes are read narrowly, and not expansively. And so, but certainly the Bureau in its existing draft guidance documents, as it may take a very, very broad approach. So it's-- so when we talk about sort of HR benchmarking approaches, or what HR professionals can discuss, you know, amongst themselves, especially where they are members of the same industry, people do need to rethink how they go about those sorts of projects. And again, this was just an area that people didn't have a lot of concern about before, and now they have to think about what they can do, whether they can do it, and what safeguards they should have if they're going to do it.

Andrew McCoomb  26:48
So we're recording this in February 2023. If the last six months have shown us anything, it's that the Competition Bureau is intent on making sure everybody understands it's willing to throw its weight around. And it makes you wonder if there's going to be a showcase action to let everybody know that these provisions are real, and they're going to be taken seriously and enforced. What are you saying to clients now, Chris, in terms of best practices to get ready in this next few months, and get ready for a world where these are potentially realistic penalties and consequences that they could face if they run afoul with these provisions?

Chris Hersh  27:22
In terms of agreements that are being entered into already now, you cannot simply insert the boilerplate provision. And I focus on the no-poach because again, wage-fixing is very, very uncommon. The only situation I can think of where that might come up is in the context of a company who was sourcing employees or staffing company that the salary paid to the employee is part of the negotiated deal. And there are also other provisions related to sort of compensation, employee compensation again, that's a very specific situation. So in terms of no-poaches, do you need a no-poach? That's question one, like, is this something that you are going to put in simply because it was the part of the precedent or boilerplate and you've done in the past? Do you need to do this? If the answer is yes, we still think it's very important to have a no-poach for the reasons, you know, because we need to protect our people. Because, again, we, there's a legitimate interest in working together with another company. And both companies believe it's appropriate to have a reciprocal wage or no-poach agreement. We'll talk about that in a second. Get back to the reciprocal piece. Okay, let's think about how to scope that properly. Because this, we can't just say, oh, you know, the standard, any employee two years post—for up to two years post-agreement is good enough. So what we're doing is we're-- we're playing with the variables, you know, how long do you think is really legitimate in terms of, do you need this, you know, is one year sufficient? Restricting the types of employees to whom it applies, because again, many of these are drafted very broadly, it's a sort of any employee restriction. Okay, let's say any, you know, employees above a senior, certain sort of seniority position, employees who you would only have come into contact as a result of this engagement you're having with-- with one another, so that you're not, you're not trying to be overly broad. Employees who have proprietary information, employees have worked on the project. So we're trying to be much more focused about what is legitimate, you know, to the extent that a no-poach is appropriate, what's the legitimate interest you're trying to protect? And what is the most reasonable, least restrictive way to protect that in the circumstances? So it's--, it's not a business as usual, it's—you to be much more thoughtful. You can't just slap that same boilerplate provision in and assume you're going to be fine. And I think the one point I was raising is that the law only applies to reciprocal no-poach agreements and that's because the prohibition is on not hiring each other's employees. But, the Bureau's guidance document says you have you have look to the totality of the company's engagement with each other. So if you've got Company A and B, and they've got an agreement and that agreement, Company A says are not going to hire Company B's employees, that's a one-way no-poach, that's not subject to the law, on its face. But if the same companies have an agreement where Company B then says I won't hire Company A's employees. So you've got two separate one-way agreements, that if you were to put them together, you would effectively have a reciprocal, no-poach. The Bureau has said that they will consider those situations, you can't sort of cleverly contract around this to create what appear to be one-way agreements that when read together, are effectively a two-way agreement.

Ailsa Robertson 30:41
Andrew also mentioned the increasing tendency of the Competition Bureau has been very proactive in investigating these new offenses under the Competition Act.. How do you see this actually working in practice? Do you see the Competition Bureau relying on whistleblowers more? Or do you see more proactive investigations taking place?

Chris Hersh  31:02
Again, so this is just conjecture. You know, given the experience with sort of how the Bureau has managed, or, again, those types of the non-comp agreements or the non-competition provisions in the context of the sale of a business, or even the non-competition agreements in the context of employer- employee contracts. You know, they have not gone after the sort of-- with any degree of vengeance, if you will, the Bureau has a lot on its plate, I think they will try and be reasonable. I think that, you know, I don't think them sending out flying squads to force companies to produce all of their agreements to them so that they can look for offenses in this area. I don't think they-- they just simply don't have the resources to do that. Nor do I think they have the inclination to do that. So I think the ways that this will come to the Bureau’s attention, I think, primarily will be through whistleblowers. Whistleblowers, we say no people who are well-intentioned, if you will, there's also potentially strategic whistleblowers, people who have entered into a no-poach, who feel they've been forced to enter into it and who want to get out of it. Do they go to the Bureau? Or do they simply tell somebody, hey, we don't think this is enforceable. We think this is a, you know, this is potentially a criminal violation? Do people sort of use the Competition Act. as a sword to get out of agreements that they don't like? So-- I but I think whistleblowers are going to be the primary source of any enforcement action. The other ways something might come to the Bureau’s attention is, if you're engaging with the Bureau in an unrelated matter, but you have to disclose contracts to them. And of course, that, for example, in the context of a merger review, or some other investigation, does that raise potential red flags?

Andrew McCoomb  32:38
So Chris, can you tell us about how this is going to apply to companies existing agreements that are entered into before June 23, 2023, when the law changes? Will these be subject to the new law at all? And what approach should companies or their compliance teams take to reviewing their existing agreements?

Chris Hersh  32:56
The draft guidelines, again, they're not terribly clear. And what they say is, that the provision is going to only apply to new agreements entered into by employers on or after June 23, 2023. With a caveat, and I'm quoting from the guidelines, as well as to conduct that reaffirms, or implements older agreements, that is incredibly unclear and it's a real problem. Let's say you've got a pile of agreements that could be caught by the provision, might not be able to shelter under the ARD. If you simply don't enforce them, is that good enough from the Bureau's perspective? I don't know. If you seek to enforce them, even if the term of the agreement or the provisions of the agreement are overly broad, but if you attempt to enforce or only seek to enforce them in a way that is consistent with the application of the ancillary restraints defense, is that okay? So it's-- it's does not give companies that much comfort about what they can or can't do or should do, with respect to their existing portfolio of agreements. And for some companies, the concern can't be underestimated, because there are companies who have thousands of these agreements, they have standard terms and agreements that are negotiated or signed at various levels of the company. There's no central repository. And so that is a big-- that is probably the biggest problem for companies. And the funny thing is the companies who are most concerned about this are the companies who are the ones who are most likely to want to comply with the law as a general proposition, obviously, if you have a wage-fixing agreement, that-- that's something you should discontinue before June 23. But again, it'--s it's really what's really fussing the business meeting is the no-poach and non-solicit provisions. I have a suspect in Canada, there's millions of agreements that have these provisions, that, again, would be prima facie illegal and might be too broad to shelter under the ARD. So that's where I think the business community and the legal community go to the Bureau to provide guidance for companies, because it'd be a shame if companies sort of undertook unnecessary compliance expense, simply because the guidance that the Bureau gives is very unclear.

Ailsa Robertson 35:14
And we should just note that that the consultation process on these guidelines is ongoing until March 17 and after then, there may well be changes and clarifications made to those.

Chris Hersh  35:24
Well, certainly that's the hope, because right now, there's a lot of ambiguity and you know, when it comes to ambiguity, in respect of a criminal provision of the law, that is, you know, that's not good from a business perspective.

Ailsa Robertson  35:38
We hope you enjoyed this episode of Disputed. If you'd like to find out more about this topic, or how to contact our guests, please visit nortonrosefulbright.com/disputed. Also, if you have any questions, feedback, or topics that you'd like us to cover in a future episode, please do email us at disputed@nortonrosefulbright.com. And if you would like to hear more, please subscribe to Disputed on Apple Podcasts, Spotify or wherever you get your podcasts. 

Norton Rose Fulbright Canada LLP is providing this podcast as a purely educational service. While it may contain legal information, it should not be construed as legal advice, a legal opinion or recommendation, or a statement of process or policy of Norton Rose Fulbright Canada LLP. The information, views and opinions expressed by guest speakers are entirely their own and their appearance on the podcast does not express or imply an endorsement by Norton Rose Fulbright Canada LLP of the information, views or opinions expressed by any guests, or of any entities they represent. Norton Rose Fulbright Canada LLP expressly disclaims any and all liability or responsibility for any direct, indirect, incidental or any other form of damages arising out of any individual’s or organization’s use of, reference to, reliance on, or inability to use this podcast or the information presented in this podcast.